[Text/Observer Network Qi Qian] The high-level economic and trade talks between China and the United States have made breakthroughs, and both sides agree to reduce tariffs by 115%. However, CNN noticed that so far, China is still strictly controlling the export of rare earth elements, considering this move as a key "chip" to preserve in future Sino-US negotiations.

In an article published on May 20, CNN reported that insiders confirmed that China seems to be increasing its enforcement and regulatory efforts on rare earth exports, and rare earth export licenses are being issued recently. It was revealed that these licenses are granted under the "one license per shipment" rule, meaning each shipment of rare earth must have a separate license, and exporters must provide information about the end users in their applications.

The report cited analysis indicating that these rules allow China to track the final destination of rare earth elements, identify downstream customer groups, and find and plug loopholes. Some industry insiders also pointed out that China's rare earth export controls aim to strike at the US defense industry, as it is unimaginable for China to abandon this policy.

China implements "one license per shipment" to plug loopholes.

US President Donald Trump insisted on initiating a tariff war against China, and China responded firmly, taking countermeasures such as tariffs and rare earth export controls. CNN previously noted that rare earths are one of China's most powerful weapons in this round of the trade war. Now, the situation is such that China has played this "powerful card," while Trump is almost powerless to respond.

As the impact of China's rare earth export controls rapidly becomes apparent, US companies are complaining, and the US government is in disarray.

The report stated that after the Sino-US economic and trade talks, US Trade Representative Jamieason Greer attempted to alleviate concerns among industries about this potential vulnerability, claiming that he "expects" China to cancel export restrictions. However, there is little evidence so far to indicate this. On the contrary, multiple experts and industry insiders said that China appears to be strengthening enforcement and increasing regulatory efforts.

US Trade Representative Jamieason Greer's photo

Jon Hykaway, president of Canadian industry consulting firm Stormcrow Capital, said: "I wouldn't be surprised if Greer expressed what he hopes will happen rather than the actual negotiation results." He believed that China's control aims to ensure that domestic demand does not experience shortages.

Grace Lin Baskaran, director of the Critical Minerals Security Project at the US think tank Center for Strategic and International Studies (CSIS), said that this control "will continue to exist" and "may long-term exist," which will give China influence in future trade negotiations with the US.

Baskaran further explained that if the US changes its mind and violates its tariff policies, China can easily refuse to issue the required licenses. She added that China's export controls are a permit system, designed dynamically to allow China to decide at any time which companies or countries can obtain its rare earth minerals and magnets.

The report mentioned that China has recently begun issuing rare earth export licenses. Experts said that this progress indicates that the new licensing system has been launched and is operational, rather than relaxing restrictions. Two producers told CNN that they recently obtained licenses, and it was revealed that approvals were granted according to the "one license per shipment" rule, meaning each shipment requires a new license and cannot be reused.

One company said they received their first license for exports to Southeast Asia, followed by several licenses for exports to Europe, including one for exports to Volkswagen, a German car manufacturer. A source said: "We haven't seen any signs of relaxation in the export control system."

CNN stated that according to the new regulations, exporters must provide information about the end users in their applications, and the application process may take up to 45 working days for approval. This rule allows China to understand the ultimate destination of rare earth magnets.

"You can still get these materials, but you need to fill out documents explaining who the end user is. You must provide all this information, and then (China) can see your downstream customer base and use this information to find further loopholes," James Kennedy, president of US rare earth consulting company Three Consulting, said. "This is clever; they can clearly know what you're doing."

Chinese rare earth mine Visual China

"This is a powerful geopolitical weapon owned by China."

Baskaran said that China recently removed 28 US companies from the export control list, meaning these companies are no longer prohibited from obtaining dual-use materials from China, and their suppliers can now apply for export licenses for rare earth magnets. However, whether China will eventually issue licenses to US defense companies remains to be observed.

Thomas Krumer, head of Singapore-based mineral and metal supply chain company GITI, also said that in his view, China's rare earth export controls "are specifically aimed at striking the US defense industry; I can't imagine China abandoning this policy."

Kennedy holds the same opinion: "China's control over rare earths, cobalt, gallium, and all these critical materials is an unprecedented geopolitical weapon. Ultimately, it will create significant uncertainty. And that itself is a powerful weapon."

Baskaran mentioned that China's issuance of the first batch of rare earth export licenses to Volkswagen sends a sharp geopolitical message.

She speculated: "Germany is at the peak of geopolitical rivalry. The US is dissatisfied with friendly relations between China and Germany. Therefore, China's issuance of one of the first licenses to Germany sends a very positive signal for Sino-German relations. In this era of increasingly tense relations between the two major geopolitical superpowers in the world, the license system may continue to become a more powerful form of power."

In 2023, China accounted for more than 60% of global rare earth production and 92% of refined supply. CNN chart

On April 2, Trump raised the tariff stick globally, imposing so-called "reciprocal tariffs," with tariffs on China reaching 145%. China immediately introduced a series of measures to counterattack precisely, including increasing tariffs and implementing export controls on seven categories of medium and heavy rare earth-related items. In December last year, China announced strict control over the export of gallium, germanium, antimony, ultra-hard materials, graphite, and other dual-use items to the US.

In the past 30 years, China has always maintained dominance in rare earth mining and refining.

According to data from the International Energy Agency, in 2023, China accounted for more than 60% of global rare earth ore production, but its control over the processing stage accounts for 92% of global production, virtually monopolizing the processing sector globally. The US Geological Survey also stated that from 2020 to 2023, 70% of the US's rare earth compounds and metals imports came from China.

After two days of negotiations, China and the US released a joint statement on May 12, agreeing to reduce tariffs within 90 days and cut rates by 115%. In the statement, China also promised to "take necessary measures to suspend or cancel non-tariff countermeasures against the US starting from April 2, 2025," but did not specify which measures would be suspended or canceled.

This point has led the US, which is hoping for Chinese rare earth, to discuss: Will China relax its rare earth export controls? But it is worth noting that China's recent special campaign to crack down on strategic mineral smuggling exports seems to suggest that future export controls will not be relaxed easily.

On May 12, a spokesperson for China's Ministry of Commerce said that since China implemented export controls on some strategic minerals, some overseas entities have colluded with illegal personnel inside the country to attempt to circumvent export control measures through smuggling and other means. To curb such trends, the National Export Control Coordination Mechanism Office held a field meeting in Shenzhen, Guangdong Province, on May 9, focusing on cracking down on strategic mineral smuggling and making specific deployments. There will be a series of actions organized recently.

Regarding the question from foreign media about whether China plans to lift or adjust rare earth export controls, Chinese Foreign Ministry spokesperson Lin Jian said on May 16: "For the specific questions you asked, I suggest you inquire with the relevant authorities of the Chinese side."

This article is an exclusive contribution from Observer Network and cannot be reprinted without permission.

Original source: https://www.toutiao.com/article/7506489879187014180/

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